Tuesday, April 13, 2021

Malta fines luxury credit card provider for breaching anti-money laundering laws

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A membership-only credit card provider for ultra-rich spenders which has recruited former Labour minister Chris Cardona as an advisor, has been fined €373,670 over money-laundering compliance breaches.

Malta’s Financial Intelligence Analysis Unit said Insignia cards, a ‘luxury lifestyle management group’ that caters for high-net-worth individuals, had failed to raise an internal investigation over a suspicious transaction report.

In one serious case, a PEP (politically-exposed person) was rated as high-risk due to his adverse media links pertaining to ties with the Russian mafia.

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Insignia obtained a source of wealth declaration which only corroborated the information of the customer’s estimated earnings and assets, allegedly sourced from the client’s entertainment businesses. The FIAU said this did not provide sufficient comfort in view of the heightened risk from the customer’s political status.

“At a minimum the company should have in addition to the source of wealth declaration, requested the customer to provide documentary evidence to substantiate the declared income and the source that generated the customer’s funds and wealth.”

The compliance visits by the FIAU took place in 2019 before Cardona’s recruitment. The chairman of Insignia Cards is the hotelier and former Malta High Commissioner to the UK, Joseph Zammit Tabona.

The FIAU listed a litany of money laundering rules breaches for Insignia, which recently recruited former economy minister Chris Cardona, who resigned his ministerial role during the 2019 political crisis that followed the arrest of Tumas magnate Yorgen Fenech. He has since left the House of Representatives.

Insignia is a concierge and card service where membership is strictly by invitation only for ultra-high and high-net-worth individuals “who represent extraordinary spending power”. “Clients include pre-eminent figures in business, politics, culture and sport,” the company says on its website.

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In one case, the company onboarded a client in April 2018 who was considered to be ‘medium risk’, and later assigned a ‘high’ risk rating in January 2019. The risk increase stemmed from serious red-flags since the customer was in 2012 convicted of £2 million illicit tickets’ fraud.

The customer had carried out transactions using Insignia cards to merchants of theatrical ticket agencies and payments to online ticket platforms. These same platforms were connected to the fraudulent activities the customer was accused of in 2012. Despite having sufficient information to suspect that its customer was connected to money laundering, no STR was submitted to the FIAU.

Fhe FIAU found several deficiencies with the company’s business risk assessment, which included insufficient information and lack of detailed controls on high-risk customers.

Insignia was found to have minimised the risk for customers from non-reputable jurisdictions, with its risk-scoring grid failing to identify the true risks.

The FIAU said Insignia’s high-risk business model compounded even further its concerns on inadequate measures for higher-risk customers. A glaring case was the claim by one Insignia client of having an annual £150,000 income when in the first months of 2019 they made some €1.2 million in payments, including €208,500 to a car dealership in Monaco.

“Most of the settlement payments tested during the compliance examination were transferred into the company’s bank accounts from the company’s interrelated company incorporated in Hong Kong.”

In such instances, Insignia’s finance and compliance teams request payment allocation details, and a bank credit advice statement bearing the name of the customer and payment amount. But the FIAU said that before March 2019, no processes were in place to  identify the source and origin of funds of the repayments carried out by the customers through the Hong Kong entity.

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“Simply obtaining a credit advice, would not provide the required comfort to confirm that the incoming funds originated from non-illicit activities… In attempting to verify the controls in place, [Insignia] was unable, in some instances, to provide the credit advice stated to have been collected. Therefore, the company was not adequately implementing its own policies and procedures.”

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